Weekly Markets Thoughts «

This is what I call a rock-and-roll week! Anybody scared? You should not! After a good advance of the broader markets these pull-backs are more than normal. The week before, I suggested to take some profits and to forget about the markets until the end of the summer. If you did miss this suggestion, do not get nervous as nothing major is expected soon. As I already have said, the markets are entering a period of a sideways move which could last for a couple of months. The recent decreases are a bit too deep for such a short period and we are probably going to witness some sort of a bounce back action next week. Don’t get very excited about this either as it will go nowhere! It would only be a normal adjustment after the fall down.
On the currencies’ side, we saw a record low for the $US on July 24th and a bounce back right after. It is not easy to break a historical support. The dollar is due for some rest and is not going to fall sharply as many analysts suggest. All the currencies had a good run recently and we can expect that the profit taking action will stop them for sometime before the race continues. This in turn will help the US dollar for now (but not for long!).
The recent decline of the long term interest rates is giving some relief for the bonds as well. However, we should not forget that the major trend is on the up side and this is only a temporary benefit for the bonds.
The stock markets are under pressure after reaching new highs for some of them. Dow still has a room to go down to its good support of 12750 but is unlikely to cross the 12850 mark. The S&P 500, NASDAQ, the TSX Composite and the FTSE 100 indexes are already at their supports and a rebound action is very possible. These respective supports are 1450, 2525, 13710 and 6170.
Crude oil is continuing to outperform its pears from the resources sector. It is now approaching its all time high of $80.64 and has enough steam to reach it and achieve a new record. However, I think this is not going to happen now but rather later this summer or early in the fall. The precious metals are coming back from their recent runs and are still in a process of confirming the beginning of the long awaited new intermediate wave up. Gold and silver should not go bellow $655 and $12.60 respectively. The up side will be confirmed by breaching $685 for Gold and $13.30 for Silver.
We are approaching exciting moments but for the next month or so the markets will give us the opportunity to take advantage of our summer. Keep your energy for the fall action!
Good investing and best regards,
Stefan Penkov